Applying for a mortgage means a lot of paperwork. At this stage, you will need to provide important information on your employment status, financial history, as well as a proof of identity and address.
If the solicitor and surveyor checks come back issue-free, and the price is confirmed, your broker will make the application for the mortgage on your behalf.
It would be smart to have these ready in advance:
- Proof of identity – usually a passport or driving license.
- Proof of address – give 2 different forms of evidence (electrical/gas bills, council tax bills, bank statements are all recognised). These documents must be dated within the previous 3 months as anything older will not be accepted.
- Proof of employment – for example a P60 and payslip for the previous 3 months.
- Proof of savings/outgoings – you must provide bank statements to show your incomings and outgoings. These must all be dated within 3 months.
What happens once the documentation has been provided?
As part of applying for a mortgage, a full credit check will be performed which will look at a number of different factors. These include:
- The electoral register to confirm your current and previous addresses
- All open credit commitments including their start date and loan amounts
- All closed credit commitments including their start/end dates and loan amounts. This is done for the previous 6 years
- Any missed repayments and the number of times this has happened
- Any current account overdraft facilities
- Previous applications, whether accepted or rejected and their footprints
- All bank accounts in your name, including joint accounts with other people
- Any history of bankruptcy and CCJs (County Court Judgements)
- Checking your identity to see if it has been used for fraud
The information derived from the credit check will help lenders decide whether you are eligible for the mortgage applied for. Some of the checks, such as the electoral register, are used to confirm you are a real person currently living the UK. It is important to be on the electoral register as this is classified as trust signal and reduces the risk of fraud for the lender.
The number of loans and/or credit cards you currently have will be considered along with their outstanding amounts to show and prove your financial commitments. The information can also be used to determine what you can afford.
All your current accounts you hold will be checked which includes joint accounts. If the other party has a bad credit rating, this will impact your application negatively as the lender will assume that you may be responsible for paying the other party’s finances and could overstretch your finances.
Many mortgage lenders will “stress test” your application through a number of different scenarios to ensure you will be able to afford the mortgage repayments in case your circumstances change. This includes examples such as interest rate rises, retirement and maternity leave. The aim is to make sure you can afford the mortgage repayments if such changes do take place. For this reason, you may be asked to provide more information on your monthly outgoings.
Lastly, the lender takes into consideration any history of missed repayments or declared bankruptcies within the past 6 years. This is again to confirm the level of risk for the lender and the greater the risk, the less likely you will be successful in your application for a mortgage.
What about self-employed mortgage applicants?
For those who are self-employed, the process of applying for a mortgage is the same, and most of the documentation to prove ID/address will be the same. There is however an additional requirement when proving employment status as you will need to provide 2 years’ worth of accounts and tax returns.
Any discrepancies such as incorrect spelling of names and unusual transactions will delay the process. Go through your documents making sure all your details are correct and provide proof for any unusual transactions such as inheritance or gifts from family. A letter from the gifter would suffice in most cases.